Shares of social network company Snap (NYSE: SNAP) fell as much as 5.3% on Thursday. Shares finished the trading day down 4.1%.
The stock's decline on Thursday extends Snap's double-digit slide on Wednesday as bearish sentiment about the company's worse-than-expected third-quarter earnings release persists. In addition, an analyst downgrade from Morgan Stanley following the earnings release may have made matters worse.
Snap's third-quarter included a number of reasons to be disappointed. Not only were Snap's 178 million daily active users (up 3% sequentially) short of expectations, but revenue was significantly lower than the consensus analyst estimate for the quarter. Revenue was about $208 million. On average, analysts were expecting third-quarter revenue of $239 million.
Disappointed with the quarterly update, Morgan Stanley analyst Brian Nowak said (via CNBC ) the results "speak to growing challenges facing SNAP's monetization potential and user opportunity." The analyst lowered his price target for Snap from $14 to $11. Snap finished the trading day at $12.38.
To help address its underwhelming growth in daily active users and its weaker-than-expected growth in ad revenue, Snap CEO Evan Spiegel said the company is overhauling its app with a redesign. He warned investors that it is a risk, particularly in the near term. But he believes it will pay off over the long haul.
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